The Political Economy of Job Loss in the United States, 1970-1980

Many analysts have asserted that recent interregional shifts in investment and jobs in manufacturing are the product of variations in the socioeconomic characteristics of geographic regions. Conventional industrial location theorists tend to point to the market potential, physical characteristics, and human capital endowments of geographic regions. In contrast, neo- Marxist and business climate theorists typically cite political-economic explanations related to the strength and cost of labor, the level of taxation, and the extent of social welfare provisions. Using state level data, I evaluate the relative empirical utility of these various explanations in predicting changes in employment in manufacturing between 1970 and 1980. The results provide partial support for the political-economic explanation and no support for conventional industrial location theories. In particular, the empirical evidence points to the importance of labor organization in promoting the relocation of manufacturing employment.